Kim Dotcom's Lawyers Object to U.S. Government's Evidence Sharing

Since Kim Dotcom and other leaders of Megaupload were indicted by the Justice Department nearly two years ago, proceedings in a Virginia federal courtroom have screeched to a near halt. No big courtroom showdown will take place until New Zealand judicial authorities decide sometime next year whether to extradite the defendants accused of racketeering and criminal copyright infringement.

Until then, Dotcom's attorneys and government lawyers engage in side battles. The latest came late last week when the parties traded letters to the court over a sealed ex parte order that allowed the government to disseminate to entertainment industry trade associations some of the evidence in the case. The newest controversy raises the specter that Hollywood studios could soon bring a civil lawsuit against Megaupload and addresses the tricky balance between due process against a foreign defendant and victims' rights.

Although Dotcom and the U.S. government don't agree on much, both sides appear to be frustrated at the lack of action in the Virginia court.

For Dotcom, he'd love to challenge an order seizing property that the U.S. government claims is subject to forfeiture. He's been denied that opportunity because the government insists he must first show up in the country. In the absence of submitting himself to the jurisdiction of the Virginia court, Dotcom's lawyers have made limited appearances.

Now the defendants are upset at word that the government late last month obtained a secret order to share information related to the case. In a letter to the judge last Wednesday, they wrote:

"In the present instance, the Government's covert filing has deprived Defendants of their due process right to meet and oppose the Government's request, and has done so without justification. The defendants in this case have been indicted, their assets have been frozen, their business has been destroyed, and their liberty has been restrained. Given these constraints, it is unclear what evils the Government fears the Defendants will inflict if provided notice of the Government's submission, beyond having Defendants' counsel come into court to make opposing arguments."

Dotcom's attorneys further argue that allowing the dissemination of a "one-sided, cherry-picked set of facts" threatens to prejudice them by "improperly infect[ing] the jury pool before Defendants are afforded any opportunity to present their side of the story."

On Friday, the Justice Department responded. The government reiterated its objection to allowing the defendants to have any say in the matter when Dotcom has refused to appear in court. In fact, they argue the judge shouldn't recognize the Megaupload lawyers' involvement and suggest that the above letter that discussed a sealed order was itself a violation of the court's orders.

Nevertheless, government attorneys debate the merits of Dotcom's request to be provided information and an opportunity to oppose.

Megaupload is accused of causing the entertainment industry hundreds of millions of dollars in damages by knowingly aiding piracy. The same evidence that has precipitated a criminal action against Dotcom and his cohorts could become grounds for civil lawsuits on behalf of copyright holders. But any entertainment companies wishing to sue Megaupload might not have the luxury of waiting around forever. Typically, in copyright lawsuits, the statute of limitations is three years.

The government is equally, if not more, irked that an extradition hearing in New Zealand originally scheduled for August 2012 has now been pushed back to April 2014.

"This lengthy delay until more than two years after the arrest of the defendants may jeopardize known and unknown victims' rights, including their right to full and timely restitution under laws around the world," says the government in its response to Dotcom's lawyers. "Such restitution claims could now theoretically be available against not only those awaiting extradition, but corporate entities, other fugitives, and associates; such claims may not be available or may be severely curtailed by the time the extradition hearing does actually take place."

Justice Department lawyers also give the example of an independent movie producer whose works were shared on Megaupload. Without knowledge of that information, they say "her right to provide specific evidence that may be helpful to the New Zealand court's determination of eligibility for extradition may go unfulfilled, and her claim for full and timely restitution could be barred."

And as to claims that the sharing of evidence might taint the jury pool, the government says such a view would be "more credible" if the defendants didn't have such a high profile and many opportunities to present their side of the story. "To summarize Kim Dotcom's many appearances, interviews, webpages, articles, statements, and tweets about his claims about the evidence, witnesses, personalities, and circumstances in the criminal case pending before this Court would take thousands of pages and many hundreds of hours of video and audio," they say.

The extradition hearing is scheduled for April, although it won't be terribly surprising if it's delayed once again. If the hearing happens in springtime, the U.S. government says the release of records will become public then.